Tax Season is Coming!
Tax season isn’t the most wonderful time of the year. For many, it can be confusing and stressful. As military spouses, we’re often stuck handling the mess of tax filing. It’s not fun but don’t worry—it’s not all bad news. There are a few simple tax tips that can help make taxes less daunting and improve your finances in the long run.
1. Get Organized
It may sound simple, but many people are scrambling come tax time to find their documents. Many times it causes people to leave off valuable deductions. And we all know military moves add a degree of difficulty when it comes to staying organized.
Getting organized before you start will help you avoid forgetting information that can save you money like deductions on non-reimbursable moving expenses or Reserve travel. A great way to get organized is to use a portable file box with all of your documents in one place. If you want to organize without all the papers, check out a scanner app. Scanner apps allow you to turn a picture into a PDF.
I use Tiny Scanner Plus to keep our documents and receipts organized on my laptop so come tax time I have everything in one place, and I don’t have to spend hours searching. Plus, I can do our taxes anywhere. So, take the time to start scanning documents to be prepared to file on-time!
2. Understand the Military Spouse Residency Relief Act (MSRRA)
State taxes are difficult for anyone, but for military families, state taxes get crazy. As a military spouse, you could end up working in more than one state in any given year. One year I had three states to file income tax with! It’s a lot to manage and keep track of. To help with this very problem, the MSRRA was passed.
Under the MSRRA, military spouses can inherit their spouse’s state of legal residency. Meaning you can use your spouse’s state of legal residence even if you’ve never lived there. You can also claim the Service members’ state if you married after they claimed the state as their legal residence.
What that means is, if your Service member lived in Texas two years before you married. And you currently live in California. You’re allowed to claim Texas as your state of residency for tax purposes.
Based on your ability to select your state of residency, you can decide which state is best for tax purposes and can save you the most money. But it’s best to ask an expert because understanding the entire MSRRA and how it applies to your individual situation can be difficult. Take advantage of the free tax and legal assistance offices on your military installation to get personal advice.
3. Contribute To Your Retirement Account
Retirement savings can mean tax savings. But unfortunately, military spouses’ retirement often comes second fiddle. This is due to many milspouses being stay-at-home parents with no earned income. Because of that, the savings focus usually goes to the Service member. Retirement savings shouldn’t be all about the Service member.
Military spouses must save for retirement too. There are two main ways you can receive a tax-advantage by saving for your future:
- If you’re employed, your employer may offer a retirement savings account like a 401k or the Thrift Savings Plan (TSP). If they do, you can save with payroll deductions.
- If you aren’t employed, you can save using an Individual Retirement Account (IRA) at a bank or financial institution. Whether it’s an employer plan or an IRA, both provide tax benefits.
Before you file your income tax, take the time to review your current retirement savings, or start saving for retirement. You have until April 15, 2020, to save money in your retirement accounts. For employer plans, the maximum you can contribute to your 401k or the TSP is $19,000 for 2019. With people 50 and older allowed to save an additional $6,000. When it comes to IRAs, you’re allowed to save $6,000, but if you’re over 50, you can save an additional $1,000.
4. Get Free Tax Help
Most of us don’t have fun doing our taxes. It can be difficult and time-consuming. With temporary duties and deployments, the “fun” job of filing taxes often falls on the military spouse.
A little help can go a long way to reduce stress, mistakes, and the time it takes to file. And one of the perks of military service is tax help. But many military spouses aren’t aware of all the tax resources available and that most of them are completely free! Here’s where you can get your tax help.
Installation Tax Assistance Center
Most military bases and posts provide free in-person tax preparation for Service members and their families. It’s a program provided by the Armed Forces Tax Council called VITA or Volunteer Income Tax Assistance. VITA professionals are trained by the IRS to help with the unique tax issues of the military. Location and hours can be found in your installation directory.
Military OneSource MilTax
Military OneSource provides MilTax, which is a combination of helping your find personalized VITA tax consultants as well as H&R Block online preparation and e-filing software. All of which will help with your personalized tax needs. All Military OneSource services to include MilTax are available to Service members and their families for a year after they leave service.
IRS Free File
The IRS provides free tax preparation and filing software to anyone who makes below $66,000.
Discounted Tax Preparation Software
Companies like Turbotax and H&R Block provide free or discounted versions of their software to the military community. Turbotax offers its Free Edition to E1-E5 Servicemembers and their families. Ranks E-6 and above receive a $5 discount, but if you’re a USAA member, you can get up to $20 off.
You’ve Got This!
Military finances, especially taxes, can seem daunting and difficult. But with the right support, you can take charge moving forward.
